The federal fraud trial for Donald Watkins and his son began Tuesday with mentions of alleged victims, including sports stars Charles Barkley and Bryan Thomas, and a revelation from a prosecutor that former Birmingham Mayor Richard Arrington Jr. has immunity to testify in the case.

Donald Watkins Sr., 70, and Donald Watkins Jr., 46, are each charged with seven counts of wire fraud, two counts of bank fraud and one count of conspiracy to commit wire fraud and bank fraud relating to a conspiracy the government claims lasted for nearly a decade. They were indicted in November.

Their joint trial began Tuesday in U.S. Chief District Judge Karon O Bowdre’s courtroom, but jurors were instructed to decide their cases separately. Both Watkins men are representing themselves.

First Assistant U.S. Attorney Lloyd Peeples, Assistant U.S. Attorneys Thomas Borton, Xavier Carter, and Kyle Hankey are prosecuting the case. Peeples made the government’s opening statement.

“This case is about what happens when you trust someone and they betray that trust,” he said.

Peeples laid out a story line of how the government believes Watkins Sr. and Watkins Jr. broke federal laws: In 2005, one of the founders and owners of biofuel company Masada Resource Group founder died. Watkins Sr. had a large investment in a Masada affiliate company and had also loaned money to the deceased owner. Neither the man’s widow or co-owner Terry Johnson wanted to run the company, so Watkins Sr. asked and was appointed as the manager of Masada so he could run the business. He owned 50 percent of Masada.

In 2007 and 2008, Peeples said “things started to unravel” for Watkins Sr. after he was faced with large legal bills for an airplane cargo business that fell apart. Around the same time, Masada couldn’t get approvals for their planned plant in New York.

Watkins Sr.-- a popular attorney best known for representing the former mayor and former HealthSouth CEO Richard Scrushy-- had reputation as a wealthy business man, Peeples said. “But fame, fame doesn’t pay the bills. The defendants needed money.They needed money to support their lifestyle,” Peeples said.

According to Peeples, Watkins Sr. “cashed in” on his reputation and asked his high-profile friends to invest in Watkins Srs.' businesses. In reality, Peeples said, Watkins Sr. spent that investment money on alimony payments, loans, back taxes, clothing, and a private jet. He said Watkins Jr. used some of the money for his wife’s credit card and advertising for his State Farm insurance agency.

Terry Johnson still owned 50 percent of Masada, but Peeples said the Watkinses hid that and acted like they owned the entire company. Johnson had reached an agreement to sell his shares, but Peeples said Watkins Sr. never paid for Johnson’s shares and in turn, didn’t receive them.

“They didn’t tell the truth. But in this trial, you will see the truth,” Peeples said.

Peeples also detailed how the government believes Watkins Sr. and Watkins Jr. committed bank fraud. According to Peeples,

Watkins Sr. was in deep in debt around 2012—even his plane, which was in poor shape and had been spray painted, had been repossessed. That same year, the government claims Watkins Sr. again approached former investor Charles Barkley and asked for another $1 million investment, which Barkley agreed to. The basketball star said he would need about six weeks to gather the money.

In order to get money immediately, Peeples said Watkins Sr. and Jr. needed someone to get a loan from Alamerica Bank, which Watkins Sr. founded. In September 2012, Peeples said the Watkinses got former Birmingham Mayor Richard Arrington Jr. to obtain a large loan, and then give the money to the Watkins men.

Arrington has immunity in the case and will testify for the government.

In his opening statement, Watkins Sr. stressed that there is a second side to every story. He talked about the legitimacy of Masada and its technology, saying the company had partnered with Auburn University at one point to sponsor research in the field.

He said every representation he made to a business partner- or whom the government refers to as investor victims- was true then and he still believes it to be true today.

The elder Watkins said he agrees with prosecutors on some things, like how one of the founders of Masada died and no one wanted to run the company. Watkins Sr. said when he took on the role of CEO, he took a deal and obtained a 50 percent partnership, although the company couldn’t pay his office rent nor his salary. He said he worked for Masada without pay for years.

“We’re in the garbage business, folks. The garbage business,” he said.

Watkins Sr. said the company made it through the 2008 recession and continued to partner with big names. They planned to take the business international, first going to South America, and did 19 international partnerships in several years. Watkins Sr. traveled the world for Masada, he said. “I’ll sacrifice. I love my work. I don’t mind going to dangerous places… El Salvador, Africa, Ukraine. I don’t mind danger.”

He said Barkley and another one of his investors, former University of Alabama at Birmingham and New York Jets football player Bryan Thomas, both had agencies or people representing their interests that Watkins Sr. spoke to during the investment acquisition. He said Masada has records going back to 2001. “We maintain all records,” he said. “We don’t have anything to hide.”

The elder Watkins also said he testified before a federal grand jury twice, answered all questions and subjected Masada “third-party diligence.”

Watkins Sr. also said he wasn’t paid for his ownership in Alamerica Bank. “I didn’t take any salary for being chairman, for all the legal work I did for the bank, nothing,” he said. “It’s okay. It was a labor of love.”

Watkins Sr. also said he paid alimony money legally because in his divorce documents, he agreed to pay his ex-wife through his business Watkins Pencor. He said he also made payments to his girlfriend because he often let investors or people who traveled to Atlanta to do business stay at his girlfriend’s Atlanta home, because it was cheaper than a hotel. Watkins Sr. said he then reimbursed his girlfriend.

The younger Watkins said in his opening statement that his name was only mentioned twice during Peeple’s opening, and his involvement in his father’s business deals comes from being Watkins Sr.’s administrative assistant.

“My case is a story about family… about a son who chose to come and work for his father, plain and simple. And help his father succeed and grow his business,” Watkins Jr. said.

Watkins Jr. said he worked with Alamerica Mortgage Corporation from 2006 through 2009 and started his State Farm agency in 2012. In 2007, he said he assumed the role of Watkins Sr.’s administrative assistant and did a variety of duties including bill payment, banking, payroll, management, information technology, human resources, and managing files. Watkins Jr. said he frequently received emails from his dad about various incomes and payments.

“I had virtually no communications with any of these so-called investor victims that my father calls business partners,” he said. The younger Watkins said when money came in, his father would say what to do or pay with that money. “I carried out his instructions. That was my job,” Watkins Jr. said.

Watkins Jr. said he often contributed his personal credit and financial resources to business-related expenses when things were tight. “I’m not too proud to say things were tough from time to time,” he said, adding that he went “above and beyond” the role of administrative assistant to keep things going.

While Watkins Sr. was traveling the world for Masada, “I was the guy on the ground,” Watkins Jr. said. “My case is what it is. A son who simply worked for a father. In other words, a son simply being a good son.”

Watkins Sr. and his dealings with Masada investors is also the subject of an ongoing civil SEC lawsuit.

Danielle Thomas, the wife of Bryan Thomas, testified after opening statements. She said in 2009, she and her husband approached Watkins Sr. about obtaining a loan and said Bryan Thomas, a Birmingham native, wanted to get the loan from a local bank. In response to their inquiry, Danielle Thomas said Watkins Sr. responded with information about Masada said wrote that the company was “what a real investment opportunity looks like.”

Throughout their communication, Danielle Thomas read emails in court where Watkins Sr. mentioned that former Secretary of State and Alabama native Condoleezza Rice was considering joining Masada’s Board of Directors. “I was impressed by, that she was a part of that, yes,” Danielle Thomas said. Watkins Sr. also mentioned President Barack Obama’s chief of staff and Martin Luther King III, claiming King would make a presentation about Masada to the then-president at Camp David.

In one email, Danielle Thomas said Watkins Sr. claimed Rice had joined Masada and would be working with heads of state across the globe for international business.

The emails Danielle Thomas read in court from Watkins Sr. said both Rice and King were “intrigued” by the potential of Masada’s proposals. During one email shown in court, Danielle Thomas said Watkins Sr. talked about the possibility of Masada purchasing the now-Los Angeles Rams football team.

Watkins Jr. was copied on at least three of the emails containing information about Masada and its potential partners or plans.

The Thomases eventually invested $1 million in Masada, against the advice of their financial adviser. They still haven’t gotten their money back, she said.

Following their investment, Danielle Thomas said she and her husband visited the Masada data room, located in the basement of Alamerica Bank. The data room was disorganized, she said, but was told by Watkins Sr. that all Masada’s multi-million dollar plans were housed in that room. He didn’t offer to show the plans, she said. Danielle Thomas said she and her husband visited the room once for about 15 minutes.

Danielle Thomas was visibly emotional on the stand after seeing video clips of Watkins Sr. talking to investigators. “This is very upsetting,” she said. “I’m holding back a lot of emotions right now… Bryan is a coal miner’s son from Birmingham. My husband worked hard, and we never had Amex bills like [Watkins Sr.], we didn’t do things like that.” She continued, “He believed in you as a person.”

Watkins Sr. also questioned Danielle Thomas and said the Thomases sought him out to obtain money for their initial loan. He asked about the documents he sent Danielle and Bryan Thomas and if they sent them to their financial adviser, accountant, or lawyer and what questions those people had about the company.

“He’s our financial adviser. Do you know what that is?” Danielle Thomas responded. “You took my million dollars and did whatever you wanted with it, and now you’re questioning me about my financial adviser? Really?”

Danielle Thomas said she didn’t see anything in the agreement that said Watkins Sr. could pay his bills from her investment.

Bryan Thomas also testified, talking about his investment with Watkins and how he believed Watkins was his friend.

Takeo Spikes, former Auburn University and NFL linebacker, testified late Tuesday and said he also invested $1 million in what he believed was an investment for Masada.

The trial will continue Wednesday and is expected to last several weeks.

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